[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1111 Introduced in Senate (IS)]
1st Session
S. 1111
To promote oil shale and tar sand development, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 24, 2005
Mr. Hatch (for himself, Mr. Bennett, and Mr. Allard) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To promote oil shale and tar sand development, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Oil Shale and Tar
Sand Development Act of 2005''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Declaration of policy.
Sec. 3. Definitions.
TITLE I--STRATEGIC FUELS DEVELOPMENT
Sec. 101. Strategic Fuels Task Force.
Sec. 102. Federal leasing program.
Sec. 103. Mineral Leasing Act amendments.
Sec. 104. Royalties.
Sec. 105. Office of Strategic Fuels.
Sec. 106. Cost-shared demonstration technologies.
Sec. 107. Technical assistance.
Sec. 108. State water rights.
Sec. 109. Authorization of appropriations.
TITLE II--PROCUREMENT OF UNCONVENTIONAL FUELS BY DEPARTMENT OF DEFENSE
Sec. 201. Procurement of unconventional fuels by the Department of
Defense.
TITLE III--TAX INCENTIVES
Sec. 301. Expensing of oil shale and oil sands technology expenditures.
SEC. 2. DECLARATION OF POLICY.
Congress declares that it is the policy of the United States that--
(1) domestic oil shale, tar sands, and other strategic
fuels--
(A) represent major long-term strategic energy
assets that complement the near-term assets of the
Strategic Petroleum Reserve; and
(B) should be developed on an accelerated basis;
(2) development of those strategic fuels should be promoted
to meet the anticipated energy needs of the United States,
including civilian and military requirements;
(3) those fuels are strategically important resources; and
(4) the Federal Government and the private sector should
form a partnership to develop those strategic fuels for the
benefit of the people of the United States.
SEC. 3. DEFINITIONS.
In this Act:
(1) Office.--The term ``Office'' means the Office of
Strategic Fuels established by section 105(a).
(2) Plan.--The term ``plan'' means the 5-year strategic
fuels development plan formulated under section 101(c).
(3) Secretary.--The term ``Secretary'' means the Secretary
of Energy, acting in consultation with the Task Force.
(4) Strategic fuel.--The term ``strategic fuel'' means
domestic and military fuels derived from strategic hydrocarbon
resources to be managed and developed under the guidance and
authorities of the Strategic Petroleum Reserve as established
by the Energy Policy and Conservation Act (42 U.S.C. 6201 et
seq.).
(5) Strategic hydrocarbon resources.--The term ``strategic
hydrocarbon resources'' means--
(A) oil;
(B) oil shale;
(C) tar sands (commonly referred to as ``oil
sands'');
(D) coal-derived liquids;
(E) gas-derived liquids; and
(F) any other hydrocarbon resource determined by
the Secretary.
(6) Task force.--The term ``Task Force'' means the
Strategic Fuels Task Force established by section 101(a).
TITLE I--STRATEGIC FUELS DEVELOPMENT
SEC. 101. STRATEGIC FUELS TASK FORCE.
(a) Establishment.--There is established a Strategic Fuels Task
Force to develop a program to coordinate and accelerate the commercial
development of strategic fuels in an integrated manner.
(b) Composition.--The Task Force shall be composed of--
(1) the Secretary (or the designee of the Secretary);
(2) the Secretary of Defense (or the designee of the
Secretary of Defense);
(3) the Secretary of the Interior (or the designee of the
Secretary of the Interior); and
(4) representatives of industry, affected States and
communities, and other stakeholders, appointed by the
President.
(c) Development of a 5-Year Plan.--
(1) In general.--The Task Force shall direct the Office to
formulate a 5-year plan and coordinate with representatives of
the Department of Defense and the Department of the Interior to
promote the development of strategic fuels by industry.
(2) Components.--In formulating the plan, the Task Force
shall--
(A) identify public actions that are required to
stimulate prudent development of strategic fuels by
industry;
(B) analyze the costs and benefits of those
actions;
(C) make recommendations concerning specific
actions that should be taken to stimulate prudent
development of strategic fuels by industry, including
economic, investment, tax, technology, research and
development, infrastructure, environmental, education,
and socio-economic actions;
(D) provide notice and opportunity for public
comment on the plan;
(E) identify strategic fuel technologies that--
(i) are ready for pilot plant and semiworks
development; and
(ii) have a high probability of leading to
advanced technology for first- or second-
generation commercial production; and
(F) assess the availability of water from the Green
River Formation to meet the needs of the strategic
fuels industry.
(3) Reports.--Not later than 180 days after the date of
enactment of this Act, the Task Force shall submit to the
President and Congress a report that describes the analysis and
recommendations of the Task Force for the plan.
SEC. 102. FEDERAL LEASING PROGRAM.
(a) In General.--As soon as practicable after the date of enactment
of this Act, the Secretary of the Interior, acting through the Bureau
of Land Management, shall develop, implement, and manage comprehensive
leasing programs for strategic fuels on Federal land that address all
stages of the leasing process from research and development to full
commercial leasing.
(b) Administration.--In carrying out the leasing programs, the
Secretary of the Interior shall--
(1) ensure environmentally sound and efficient development
of strategic fuels;
(2) permit leasing beginning not later than the date that
is 18 months after the date of enactment of this Act;
(3) in consultation with industry and the States of Utah,
Wyoming, and Colorado, define lease blocks that--
(A) meet requirements of industry;
(B) facilitate the efficient development of
strategic fuels; and
(C) are sufficient in size for development for a
commercial operation consistent with the Mineral
Leasing Act (30 U.S.C. 181 et seq.); and
(4) as appropriate, provide for exchanges of Federal land
for such State or private land as is necessary to achieve
responsible leasing and development.
SEC. 103. MINERAL LEASING ACT AMENDMENTS.
Section 21 of the Mineral Leasing Act (30 U.S.C. 241) is amended--
(1) in subsection (a)--
(A) by designating the first, second, and third
sentences as paragraphs (1), (2), and (3),
respectively;
(B) in paragraph (3) (as designated by paragraph
(1))--
(i) by striking ``rate of 50 cents per
acre'' and inserting ``rate of $2.00 per
acre''; and
(ii) in the last proviso--
(I) by striking ``That not more
than one lease shall be granted under
this section to any'' and inserting
``That no'';
(II) by striking ``except that with
respect to leases for'' and inserting
``shall acquire or hold more than
50,000 acres of oil shale leases in any
1 State. For''; and
(C) by adding at the end the following:
``(4) Research and development.--For a lease issued for
research and development activities, the lessee shall be
entitled to a preference right to lease additional lands to a
total acreage not to exceed 5,120 acres to develop commercial
production facilities, if the lessee submits an application and
provides evidence, and the Secretary agrees, that the lessee
has developed technology that warrants a commercial lease.'';
(2) by redesignating subsection (d) as subsection (e);
(3) by redesignating the second subsection (c) as
subsection (d); and
(4) in subsection (e)(1) (as redesignated by paragraph
(2)), by striking ``subsection (c)'' and inserting ``subsection
(d)''.
SEC. 104. ROYALTIES.
Section 35 of the Mineral Leasing Act (30 U.S.C. 191) is amended by
adding at the end the following:
``(c)(1) Except as provided in paragraph (2) and notwithstanding
any other provision of this Act, any royalty otherwise accruing to the
United States under any lease for the extraction of a strategic fuel
(as defined in section 3 of the Oil Shale and Tar Sand Development Act
of 2005) on Federal land shall be reduced by--
``(A) 50 percent if NYMEX WTI oil $22.00-23.99 a barrel on
the date on which the strategic fuel is sold;
``(B) 40 percent if NYMEX WTI oil is $24.00-25.99 a barrel
on the date on which the strategic fuel is sold;
``(C) 30 percent if NYMEX WTI oil is $26.00-27.99 a barrel
on the date on which the strategic fuel is sold;
``(D) 20 percent if NYMEX WTI oil is $28.00-29.99 a barrel
on the date on which the strategic fuel is sold; and
``(E) 10 percent if NYMEX WTI oil is $30.00-31.99 a barrel
on the date on which the strategic fuel is sold.
``(2) The reduction in royalty provided under paragraph (1) shall
terminate on the date that the project for the extraction of the
strategic fuel reaches payback, as determined by the Secretary of the
Interior (in consultation with the Secretary of Energy).
SEC. 105. OFFICE OF STRATEGIC FUELS.
(a) Establishment.--There is established, in the Office of Naval
Petroleum and Oil Shale Reserves, within the Office of the Deputy
Assistant Secretary for Petroleum Reserves of the Department of Energy,
the Office of Strategic Fuels, to ensure that strategic fuels are
developed as strategic resources of national importance.
(b) Purposes.--The purposes of the Office are--
(1) to coordinate the creation and implementation of a
commercial strategic fuel development program for the United
States;
(2) to evaluate the strategic importance of unconventional
sources of strategic fuels to the security of the United
States; and
(3) to promote and coordinate Federal Government actions
that facilitate the development of strategic fuels in order to
effectively address the energy supply needs of the United
States.
(c) Duties.--The Office shall--
(1) identify, assess, and recommend appropriate actions of
the Federal Government required to assist in the development
and manufacturing of strategic fuels;
(2) coordinate and facilitate appropriate relationships
between private industry and the Federal Government to promote
sufficient and timely private investment to commercialize
strategic fuels for domestic and military use; and
(3) facilitate a partnership with Alberta, Canada, for
purposes of sharing information relating to the development and
manufacturing of strategic fuels.
(d) Consultation and Coordination.--In carrying out subsection (c),
the Office shall--
(1) work closely with the Task Force; and
(2) establish an advisory group composed of the various
stakeholders involved in the development of strategic fuels,
including State and local representatives, private industry,
and other affected communities.
(e) Annual Reports.--Not later than 180 days after the date of
enactment of this Act and annually thereafter, the Office shall submit
to Congress a report describing the activities and recommendations of
the Office.
SEC. 106. COST-SHARED DEMONSTRATION TECHNOLOGIES.
(a) Identification.--The Secretary shall identify technologies for
the development of strategic fuels that--
(1) are ready for demonstration at a commercially-
representative scale; and
(2) have a high probability of leading to commercial
production.
(b) Assistance.--For each technology identified under subsection
(a), the Secretary may provide--
(1) technical assistance;
(2) assistance in meeting environmental and regulatory
requirements; and
(3) cost-sharing assistance through the payment of a
Federal share of not to exceed 49 percent (as determined by the
Secretary) of the capital and operating costs of the expanded
project, including environmental controls.
SEC. 107. TECHNICAL ASSISTANCE.
(a) In General.--The Secretary shall provide technical assistance
to private industry for the purpose of overcoming technical challenges
to the development of advancement of strategic fuels technologies for
application in the United States.
(b) Administration.--
(1) In general.--The Secretary may provide technical
assistance under this section on a fee-for-service or cost-
shared basis through individual agreements, cooperative
research and development agreements, partnerships, or other
approaches.
(2) Federal share.--The Federal share of the cost of
activities assisted under this section shall be not less than
25 percent, as determined by the Secretary.
SEC. 108. STATE WATER RIGHTS.
Nothing in this title impairs or in any manner affects any right or
jurisdiction of the States with respect to the waters (including
boundary waters) of the States.
SEC. 109. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated such sums as are necessary
to carry out this title.
TITLE II--PROCUREMENT OF UNCONVENTIONAL FUELS BY DEPARTMENT OF DEFENSE
SEC. 201. PROCUREMENT OF UNCONVENTIONAL FUELS BY THE DEPARTMENT OF
DEFENSE.
(a) In General.--Chapter 141 of title 10, United States Code, is
amended by inserting after section 2398 the following new section:
``Sec. 2398a. Procurement of fuels derived from coal, oil shale, and
tar sands
``(a) Utilization of Fuels to Meet Department of Defense Needs.--
The Secretary of Defense shall develop a strategy to utilize fuels
produced from coal, oil shale, or tar (oil) sands (commonly referred to
as `unconventional fuels') that are either extracted by mining or in-
situ methods and refined in the United States in order to assist in
meeting the fuel requirements of the Department of Defense.
``(b) Authority to Procure.--The Secretary of Defense may enter
into one or more contracts or other agreements to procure a fuel
described in that subsection to meet one or more fuel requirements of
the Department of Defense. Any such contract or agreement shall meet
the requirements of this section.
``(c) Clean Fuel Requirements.--A fuel may be procured under
subsection (b) only if such fuel meets such standards for clean fuels
produced from domestic sources as the Secretary of Defense shall
establish for purposes of this section in consultation with the Office
of Strategic Fuel Analysis of the Department of Energy.
``(d) Multiyear Contract Authority.--Subject to applicable
provisions of appropriations Acts, any contract or other agreement for
the procurement of fuel under subsection (b) may be for one or more
years at the election of the Secretary of Defense.
``(e) Price Limitations.--
``(1) Each contract or other agreement for the procurement
of fuel under subsection (b) shall set forth the maximum price
and minimum price to be paid for a unit of fuel under such
contract or agreement, which prices shall be established by the
Secretary of Defense at the time of entry into such contract or
agreement.
``(2) In establishing under paragraph (1) the maximum price
and minimum price to be paid for fuel under a contract or
agreement under subsection (b), the Secretary shall take into
account applicable information on world oil markets from the
Department of Energy, including global prices for crude oil,
costs of production of such fuel from both conventional and
unconventional sources, and returns on investment in the
production of such fuel.
``(f) Fuel Source Analysis.--In order to facilitate the procurement
by the Department of Defense of fuels under subsection (b), the
Secretary of Defense may carry out a comprehensive assessment of
current and potential locations in the United States for the supply of
fuels described in subsection (a) to the Department.''.
(b) Clerical Amendment.--The table of sections at the beginning of
such chapter is amended by inserting after the item relating to section
2398 the following new item:
``2398a. Procurement of fuels derived from coal, oil shale, and tar
sands.''.
TITLE III--TAX INCENTIVES
SEC. 301. EXPENSING OF OIL SHALE AND OIL SANDS TECHNOLOGY EXPENDITURES.
(a) In General.--Part VI of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to itemized deductions for
individuals and corporations) is amended by inserting after section 190
the following new section:
``SEC. 191. OIL SHALE AND OIL SANDS TECHNOLOGY EXPENDITURES.
``(a) Treatment of Expenditures.--
(1) In general.--A taxpayer may elect to treat any
qualified oil shale and oil sands technology expenditure which
is paid or incurred by the taxpayer as an expense which is not
chargeable to capital account. Any expenditure which is so treated
shall be allowed as a deduction.
``(2) Election.--An election under paragraph (1) shall be
made at such time and in such manner as the Secretary may
prescribe by regulation.
``(b) Qualified Oil Shale and Oil Sands Technology Expenditures.--
For purposes of this section, the term `qualified oil shale and oil
sands technology expenditure' means, with respect to any taxable year,
any direct or indirect costs incurred and properly taken into account
with respect to the purchase or installation of equipment and
facilities (including any upgrades thereto) relating to in-situ
treatment (or processing), mining, conversion, recovery, and upgrading
of oil shale or oil sands located in the United States for the purpose
of creating fuels, fuels feedstocks, or other manufactured products.
Such term shall include so much of the purchase price paid by the
lessor or equipment and facilities subject to a lease described in
subsection (c)(2) as is attributable to expenditures incurred by the
lessee which would otherwise be described in the preceding sentence.
``(c) When Expenditures Taken Into Account.--For purposes of this
section--
``(1) In general.--Qualified oil shale and oil sands
technology expenditures shall be taken into account under this
section only with respect to equipment and facilities--
``(A) the original use of which commences with the
taxpayer, and
``(B) which are placed in service, after the date
of the enactment of this Act.
``(2) Sale-leasebacks.--For purposes of paragraph (1), if
property--
``(A) is originally placed in service after the
date of the enactment of this Act by any person, and
``(B) sold and leased back by such person within 3
months after the date such property was originally
placed in service, such property shall be treated as
originally placed in service not earlier than the date
on which such property is used under the leaseback
referred to in clause (ii).
``(d) Special Rules.--
``(1) Property used outside the united states, etc., not
qualified.--No expenditures shall be taken into account under
subsection (a)(1) with respect to the portion of the cost of
any property referred to in section 50(b) or with respect to
the portion of the cost of any property specified in an
election under section 179.
``(2) Basis reduction.--
``(A) In general.--For purposes of this title, the
basis of any property shall be reduced by the portion
of the cost of such property taken into account under
subsection (a)(1).
``(B) Ordinary income recapture.--For purposes of
section 1245, the amount of the deduction allowable
under subsection (a)(1) with respect to any property
which is of a character subject to the allowance for
depreciation shall be treated as a deduction allowed
for depreciation under section 167.
``(3) Coordination with section 38.--No credit shall be
allowed under section 38 with respect to any amount for which a
deduction is allowed under subsection (a)(1).''.
(b) Conforming Amendments.--
(1) Section 263(a)(1) of the Internal Revenue Code of 1986
(relating to capital expenditures) is amended by striking
``or'' at the end of subparagraph (H), by striking the period
at the end of subparagraph (I) and inserting ``, or'', and by
adding at the end the following new subparagraph:
``(J) expenditures for which a deduction is allowed
under section 191.''.
(2) Section 1016(a) of such Code is amended by striking
``and'' at the end of paragraph (30), by striking the period at
the end of paragraph (31) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(32) to the extent provided in section 191(d)(2).''.
(3) The table of sections for part VI of subchapter A of
chapter 1 of such Code is amended by inserting after the item
relating to section 190 the following new item:
Sec. 191. Oil shale and oil sands technology expenditures.''.
(c) Effective Date.--The amendments made by this section shall
apply to expenditures incurred in taxable years beginning after
December 31, 2005.
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